Are your customers having a good experience?
This is a crucial question for all brands and enterprises, but it is one that’s hard to answer.
Getting to a single answer is also a complex matter, or at least, it used to be. Today, certain metrics can help business owners and marketers understand and measure customer experience.
What is Customer Experience?
Customer experience (CX) is a person’s overall relationship with a business. It encompasses all points of interaction:
- Customer service
- Quality of products
- Product features
Every little thing about a brand that makes an impression on the customer is part of CX.
Often, companies fine-tune their front-facing customer service because they think it will be enough to boost customer satisfaction. But the truth is that customer service is just one element of a person’s overall relationship with a company—many others come into play.
According to Salesforce, 80% of consumers say customer experience is just as important as the products they purchase. In the same survey, 66% of respondents say they expect companies to understand their needs, but only 34% actually do. More than half of the respondents also expect personalized services from companies.
An earlier Salesforce survey revealed that customers are willing to shift brand loyalty immediately if the experience isn’t good.
How do You Measure It?
Technological advancements have brought about new and efficient ways for brands to measure customer experience: customer metrics.
CX metrics use numerical scores and various touchpoints. Without metrics, brands would have a difficult time even deciding where to start.
With the right customer metrics, specific parameters have been laid out—it’s just a matter of calculating the final scores.
These metrics are essential elements in every enterprise’s key performance indicators (KPIs), which measure business performance. KPIs help businesses develop strategies for revenue growth, customer loyalty and retention, and increased brand awareness. Current business performance helps shape KPI, and performance is measured by various operational metrics.
There are various CX metrics that you can measure to evaluate customer experience. Here are the nine best ones your brand should use:
The 9 Best Ways of Measuring Customer Experience
1. Net Promoter Score (NPS)
Net Promoter Score is one of the most widely used metrics because of its simplicity and transparency. Developed in 2001 and officially launched as a business tool for measuring customer experience in 2003, the Net Promoter Score is now used by millions of brands, including two-thirds of Fortune 1000 companies.
NPS presupposes that a customer is a promoter. They are asked: How likely are you to recommend this brand to a friend or colleague? The customer provides a numerical answer between 0 and 10, with 0 indicating “not at all likely” and 10 meaning “extremely likely.”
The customers are divided into these groups based on their scores:
- Detractors (0 to 6) – They are not fans of the brand and have the ability to impede growth by negatively spreading their dissatisfaction to others.
- Passives (7 to 8) – They are mostly satisfied with the brand, but are not enthusiastic enough to spread the good word. Moreover, they are prone to be enticed by other brands with more attractive offers or better products.
- Promoters (9 to 10) – They are enthusiastic about the brand and will continue to support the company while encouraging others to do the same.
Calculating NPS: To get your NPS score, simply subtract your detractors from your promoters. The lowest score is -100, while the perfect score is 100.
The calculation is relatively straightforward and quite one-dimensional. This metric will be more useful when supplemented with other CX metrics.
2. Customer Effort Score (CES)
How much effort does your customer put into interacting with your brand? This is the primary question the Customer Effort Score will answer. It’s a good complementary metric for the NPS, so you will get holistic data on what constitutes an outstanding customer experience. NPS and CES will also give you a glimpse of business growth and customer retention.
To get your brand’s CES, you must prepare a customer satisfaction survey in this format: “The (brand) made it easy for me to handle my issue.” The customer is asked to score from 1 to 5 or 1 to 7, with 1 as “strongly disagree” and 5 or 7 as “strongly agree.”
The customer feedback survey must be available in real-time, appearing on the website immediately after the customer deals with their issue. If not on the site, the CES survey should be emailed to the customer right away.
Calculating CES: Get the average score of all submitted CES to determine if your brand delivers an effortless experience to the customers. The higher the score, the better. A low score means you have to improve certain customer touchpoints.
3. Customer Lifetime Value (CLV)
Calculating how much money a customer spends on a certain brand is complex. However, it can illustrate a clear picture for a company about customer relations and how they can be improved.
Customer lifetime value measures how much a client is worth over their lifetime. Getting the CLV will help brands make information-based marketing and sales decisions. It will be easier when the business has enterprise resource planning (ERP) software to capture the necessary data to measure your CX.
To calculate CLV, you need the following numbers:
- Average transaction amount – How much does a customer usually spend on the store every time they visit?
- Number of transactions – Determine the number of times a customer visits the store in a given year.
- Retention period – Length of a customer relationship.
Calculating CLV: To get the CLV, multiply the average transaction amount by the number of transactions multiplied by the retention period.
For example, a customer spends $50 on your brand every time they visit. On average, they drop by the store—either online or brick-and-mortar—at least twice a month. The relationship is already in its fifth year.
CLV = 50 × 24 × 5. So, the CLV of one customer is $6,000.
Why is knowing this important? It’s difficult to improve something that cannot be measured. Having that hard number ($6,000) will give the brand a more definitive goal: to increase a person’s CLV to at least $7,000, or higher.
You can also adjust the costs of marketing and retention programs to ensure that the brand maximizes profitability.
Further, monitoring elements related to CLV will help you improve customer retention and make better decisions to increase profits.
4. Customer Satisfaction (CSAT)
Brands always want to boost customer satisfaction, which is, essentially, a simple yes or no question: Are you satisfied with the brand? This birthed the CSAT metrics to make satisfaction quantifiable.
Every major customer transaction must be followed with a CSAT survey answerable between “very dissatisfied” to “very satisfied,” usually on a scale of 1 to 5. This allows the brand to understand if it has met customer expectations.
Here are some examples of CSAT questions:
- How would you rate your overall satisfaction with the brand?
- How satisfied are you with the product you just purchased?
- How satisfied are you with our customer service?
- Would you buy another product from us?
CSAT is very flexible. You can change the questions based on what you really want to know and the touchpoints you wish to evaluate.
The standard is the 1 to 5 scale, which translates to the following:
- Very satisfied – 5 (Excellent)
- Somewhat satisfied – 4 (Good)
- Neither satisfied nor dissatisfied – 3 (Neutral or Average)
- Somewhat dissatisfied – 2 (Poor)
- Very dissatisfied – 1 (Very Poor)
Calculating CSAT: To find out how satisfied customers are, follow this equation:
CSAT = number of “very satisfied” customers ÷ number of people who answered the survey x 100.
So, if 100 people answered the survey and 70 people said they were “very satisfied,” your score is 70:
Follow the same equation for the rest of the answers, and you’ll get the percentage of people who were “somewhat satisfied” down to “very dissatisfied.”
To complete the survey, ask a follow-up question on why they answered the way they did. This will give you a better idea of where you need to improve.
5. Customer Churn Rate
Churn rate measures the rate at which customers stop doing business with the brand over a certain period. Sometimes referred to as attrition rate, it also refers to the number of people who stop subscribing to a brand offering.
Businesses develop strategies to keep churn rate low at all times—it means they maintain favorable retention. This is crucial because customer retention costs are lower than customer acquisition, and returning customers spend considerably more than new customers.
Knowing your customer churn rate is crucial to understanding what marketing strategies and retention programs work.
Calculating churn rate: To get your churn rate, subtract the number of customers you have at the end of the month from the number of customers at the beginning of the month and divide the difference with the second number. Multiply the answer by 100 to get the percentage.
For example, you have 500 customers in the beginning and 400 at the end. The equation will look like this:
CCR = 20%
Zero is the ideal churn rate, which is difficult to achieve. Do your best to make it as low as possible by understanding why customers are churning and addressing the reasons why they jump ship.
Ideally, the brand should use another CX metric to understand customer churn.
6. Customer Retention Rate
Customer retention is the opposite of churn. It measures the percentage of existing customers who continue to spend money on the brand over a certain period.
Because customer retention is more profitable than acquisition, brands should discern customer loyalty: what makes them come back?
First, you have to calculate the retention rate.
Calculating retention rate: You need three numbers to get the retention rate: customers at the start of a given period (a week, month, or year), customers at the end of the period, and new customers during the same period.
For example, you have 500 customers at the start of the month, with 20 new acquisitions within the set period. At the end of the period, there were 450 customers.
Here’s the equation:
CRR = 86%
Of course, businesses want their retention rate to be 100%, but 70% to 80% are still healthy benchmarks.
Complement customer retention with another metric to gain customer feedback and provide a better customer experience.
PS: if you want to know more about the topic, go ahead and take a look at this article about retention rate!
7. First Contact Resolution (FCR)
As they say, first impressions last. It’s the same principle that needs to be applied to get a high first contact resolution rate.
The goal is to resolve all customer issues as quickly as possible to eliminate the need for a follow-up request. Quick and efficient contact resolution is a good way to retain customers and achieve high satisfaction ratings.
According to software and customer management company Service Quality Measurement, a 1% increase in FCR starts a chain reaction of 1% CSAT improvement and 1% reduction of operation costs.
Calculating FCR: Simply take the number of customer issues resolved on first contact and divide it by the total number of issues. Multiply the quotient with 100 to get the percent.
Suppose that in a week, there were 100 issues raised, and 89 of them were resolved on the first contact. The rest were either unresolved or were resolved after multiple customer service calls.
Here’s the equation:
FCR = 89%
8. Average Time Resolution (ATR)
It’s best to resolve customer issues as quickly as possible to increase overall customer satisfaction. This is why average time resolution matters, especially in call centers or live chats.
There is no single best timeframe to resolve an issue raised by a customer. After all, different problems—and even different industries—merit various resolutions. Complex issues require more time to solve.
However, the average resolution time is still a useful benchmark to encourage your customer service team to keep improving.
Calculating ATR: Simply divide the total time spent resolving an issue by the number of customers or conversations in a given period.
For example, there were five customer calls in one day, and the total duration for call resolutions was 30 minutes. Your ATR is 6 minutes: ATR = 30 ÷ 5.
Complement this with a CSAT or a simple open-ended customer feedback question for comments or suggestions to improve the customer journey.
9. Customer Referral Rate
While NPS asks customers how likely they are to refer the brand to others, the referral rate measures the actual referral action.
Referrals via clicks or links are easily measurable. However, if there are no referral codes or specific methods to measure referrals, employees just ask customers how they heard about the brand to determine if a referral occurred.
Calculating customer referral rate: Divide the number of referred purchases by the total number of purchases.
You have a 2% customer referral rate if in your 100 sales for the day, two came from referred links. This number seems small, but it is a very favorable referral rate.
How to Choose Which Metrics to Track
Gartner defines customer experience as the “perception and related feelings caused by the one-off and cumulative effect of interactions with employees, systems, channels, and products.” It’s the sum of all company transactions and CX initiatives.
Because many elements shape the customer experience, various metrics are needed to get a clear picture of what customers want and need from your brand. While there is no bad metric, more crucial ones will help you streamline your processes and improve your customer operations by leaps and bounds.
You should know what data your company needs and find the most relevant metrics. Most companies start with three metrics that are simple yet insightful: NPS, CES, and CSAT.
Don’t Forget Your Customer Journey Analytics
A customer’s experience with the brand is best aggregated by customer journey analytics or the evaluation of customer behavior. Customer experience is the overall relationship based on individual interactions, while the customer journey is how the brand understands the effect of a customer’s every interaction and transaction.
A customer journey map is a great way of showcasing every interaction that will lead to customer satisfaction and loyalty. The following encapsulates an average customer’s journey:
A customer wants or needs something ➡ researches where to get the item ➡ goes to the store (online or brick-and-mortar) ➡ buy the item ➡ use the item ➡ posts about the item on social media ➡ may call customer support ➡ repeat purchase
There are many ways to draw a customer journey map because people take different journeys. It’s crucial to analyze each step a customer may take and improve any pain points that may stop them from coming back.
Data-Driven Strategies to Improve CX
Reddit founder Alexis Ohanian recently tweeted: “I used to love adjectives… but becoming a CEO taught me to purge them in favor of data. Your last quarter wasn’t ‘strong’ or ‘great’—you had (number)% growth.”
Tangible numbers are easy to understand. Seeing the number beside customer satisfaction or lifetime value will give you a target to aim for.
Measuring customer experience using practical metrics will help boost customer loyalty, increase revenue growth, and hopefully entice new customers as well.